Former President Carter touts U.S. natural gas reserves

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September 20, 2011

(Platts; Sept. 19) - The United States likely will not generate a large portion of its power from green energy any time soon, but the nation's abundant natural gas reserves could provide a new path toward achieving energy security, former President Jimmy Carter said Sept. 18 on Platts Energy Week, an all-energy television news and talk program.

Carter reflected on his energy legacy, which includes the creation of the Department of Energy in 1977 and a strong push for energy conservation and renewable energy. Although Carter once pledged the nation would generate 20% of its electricity from renewable power sources, he said at current rates "it'll be a long time," before the U.S. reaches that goal. He blamed subsequent presidents for failing to continue the policies he set in motion.

"All of the presidents since then, Democratic and Republican, have basically been overly complacent," Carter said. But the recent discovery of massive natural gas reserves was a positive development, he said, and one that would lessen the need for foreign energy imports. "If you substitute for some of the dreams I had on solar energy the newly realized supply of natural gas, then we can reach that goal in a different way."

TransCanada Mainline tariff a problem for Canadian regulators

(National Post, Canada; Sept. 19) - Canada's largest natural gas pipeline is in a real mess. There's more of it than the market needs and it's running more than half empty. The implications of so much underutilized pipe linking Western gas fields to Eastern markets are already being felt; a battle has been raging between gas producers, pipeline owner TransCanada and shippers over who should pay.

Failure to find a solution after two years of negotiations has pushed the dilemma before Canada's National Energy Board, which will have to come up with a compromise. TransCanada's Mainline has moved gas for decades from Alberta to the U.S. Northeast and into Ontario and Quebec. But it's in trouble because big shale gas deposits are pushing new supplies into the pipeline's historic market, in addition to declining Western Canada gas production cutting the pipeline's flow.

Because the regulated pipeline charges tolls based on cost recovery, the cost of shipping lower volumes on the line has increased. The tariff that allowed TransCanada to recover the cost of the pipeline plus a return worked well in a rising market, but doesn't work when volumes collapse, said Cameron Gringrich, senior manager of gas services at Ziff Energy. "That is the tightrope that the NEB has to walk, whether they are going to keep supporting this regulatory compact or ... look to make radical moves."

Gas explorer sues N.Y. township over drilling ban

(The Associated Press; Sept. 16) - A Denver-based natural gas company has sued the township of Dryden (population 13,500) in central New York in an effort to strike down a recent zoning law prohibiting gas drilling there.

More than a dozen municipalities in New York have enacted gas-drilling bans or restrictions amid controversy over hydraulic fracturing. The state is moving closer to deciding whether to allow that method to tap vast gas reservoirs once thought to be unreachable in the multi-state Marcellus Shale formation.

Anschutz Exploration contends New York law gives onlythe state the power to regulate the oil and gas industry, confining local governments to regulations involving the industry's use of roads. Dryden enacted its drilling ban in August; the industry says it is illegal. The lawsuit could be precedent-setting for municipalities across New York.

Shell pushes for B.C. shale gas to find Asia buyers

(The Globe and Mail, Toronto; Sept. 18) - Shell is raising the stakes in the country's contentious energy debate, warning that Western Canada's shale gas boom will be short-lived without an urgent push to access Asian markets.

Shell Canada president Lorraine Mitchelmore said growing U.S. shale gas production is rapidly shrinking the market for Canadian exports. As a result, Western Canadian producers must find new customers in the fast-growing Asian market but are facing stiff competition there from countries like Australia.

"In Asia, they are looking to diversify their supply, but we have a very short window," Mitchelmore said. Without an expanded customer base, companies will find it hard to justify the development of British Columbia's Montney and Horn River shale gas plays. Shell has a major presence in the Montney shale play, and is working with Chinese, Japanese and South Korean companies to determine the feasibility of building a pipeline to B.C.'s Pacific coast and an LNG terminal.

B.C. government will speed up permits for LNG export projects

(Reuters; Sept. 19) - British Columbia said Sept. 19 it will promote development of an LNG export industry as the Canadian province seeks to bolster economic activity while wrestling with a multibillion-dollar deficit. The government said it will speed up permitting of coastal plants, which would allow first LNG exports by 2015.

Several companies have proposed LNG plants, led by a consortium including Apache, EOG Resources and Encana. The group aims to have a $4.5 billion facility in place in the port city of Kitimat later this decade, allowing them to sell Western Canadian gas supplies to Asia for the first time.

As part of the initiative, B.C. Premier Christy Clark's government will collaborate with First Nations communities and other levels of government to help accelerate development of coastal LNG plants. B.C.'s Montney and Horn River gas deposits are estimated to be among the largest shale gas reserves in North America.

LNG demand up; prices are up; North American exports possible

(Bloomberg; Sept. 19) - LNG prices are surging to a three-year high as demand from Japan, China and India outpaces supply increases, boosting sales for producers. Rising LNG prices are encouraging ExxonMobil, BG Group and others to develop and transport more of the fuel. That may spur North American exports by 2016.

"LNG demand will go up, there's no other alternative," said P.K. Jain, the New Delhi-based director of finance at GAIL India, the nation's biggest gas distributor and a co-owner of Petronet LNG, the largest buyer. "Demand will rise in Asia as Japan increases LNG use after Fukushima and even in Europe. With countries moving away from nuclear, long-term demand for LNG may rise."

LNG spot-market costs surged about 33% after Japan's March 11 earthquake and tsunami caused reactor meltdowns at Tokyo Electric Power's Fukushima plant and have since climbed toward $16 per million Btu, according to Mark Greenwood, an analyst at Citigroup in Sydney. Prices may rise to $20 this winter, according to several analysts.

High LNG prices a problem for India customers

(The Wall Street Journal; Sept. 20) - Rising spot prices for LNG may begin to take a toll on demand in India as several customers are unable to pass on additional costs, a senior executive with the country's largest LNG importer said Sept. 20.

"Prices are shooting up to a level where India can't afford spot LNG anymore," R.K. Garg, Director (Finance) at Petronet LNG, said on the sidelines of an industry conference in Singapore. He said 75% of the company's imports were under long-term contracts, with the rest (about 120 billion cubic feet for the year) in short-term and spot deals.

"We're still buying [spot LNG], but it's getting difficult," he said, adding that many users such as power and fertilizer plants are unable to afford spot LNG, which now costs around $16 per million British thermal units. Petronet is scouting for more term supply contracts from export terminals in Australia and Russia, Garg said.

Husky Energy to start work on offshore China gas project

(Calgary Herald; Sept. 19) - Husky Energy sanctioned its $6.5 billion Liwan gas project offshore China Sept. 19, aiming to supply as much as 500 million cubic feet of gas per day to the Chinese market. Husky's share of the project will be $2.9 billion, with the remainder coming from partner China National Offshore Oil Corp. Husky will be the operator and 49% owner.

Liwan is expected to produce as much as 300 million cubic feet a day by 2014, rising to 500 million in 2015. The deepwater field was discovered in 2006, about 200 miles southeast of Hong Kong.

Husky previously announced that it will get $11 to $13 per thousand cubic feet under a gas sales agreement with CNOOC Gas & Power Group, Guangdong branch, for initial volumes from the Liwan 3-1 field. "We've gotten to a point where all the various pieces are in place and Husky's ready to sanction the development," a company spokeswoman said.

TransCanada says oilsands line could be running in 2013

(Calgary Herald; Sept. 16) - TransCanada has dismissed a banker's report suggesting its target for startup of the proposed Keystone XL oilsands pipeline by the end of 2013 is overly optimistic due to likely delays.

New York-based Deutsche Bank oil and gas research analyst Paul Sankey wrote after returning from meetings in Washington, D.C., that construction completion by the end of 2013 "may ultimately prove ambitious" for Keystone XL, due to slow government "rubber-stamping" and his opinion that "environmentalists will likely sue" as soon as the pipeline company has U.S. State Department approval in hand.

TransCanada spokesman Terry Cunha said the company does not agree with the Deutsche Bank report. "Our expectation is that once we have a decision from the Department of State, we'll begin construction and we expect to be operational some time in 2013." Keystone XL would transport up to 900,000 barrels per day of oilsands bitumen from Alberta to U.S. Gulf Coast refineries. The U.S. State Department is reviewing the project, with a decision expected before the end of the year.

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